Homeowners rending out properties when they cannot be sold

Tuesday, April 03, 2012

According to ARLA in the last quarter of 2011, 47 per cent of its members witnessed an increase in the number of rental properties coming onto the market because they could not be sold*; a rise from 18 per cent just a year before.

ARLA's Operations Manager, Ian Potter, said: "The rise in this figure suggests that homeowners struggling to sell their homes due to the sluggish market are increasingly looking to the private rented sector to utilize their property in the short term.

"It's likely that many of these reluctant landlords will be attracted by the flexibility of a short-term let. Renting a home on a shorter basis can be a good option for anyone who has found a buyer for their home, but not found the right property to buy themselves. Equally, for anyone 'testing' a new area before committing to move there, or working away from home for short periods, renting can offer more stability and home comforts than a hotel."

Short-term lets can range from one week to a few months, and they are particularly common in cities where major events are held, such as the London Olympics and the Edinburgh Festival.

Tim Hyatt, President of ARLA said: "It is important to be wary of the potential pitfalls when renting out a property short-term, especially if it has previously been owner-occupied. No matter how short the tenancy, it is critical that landlords take a planned and professional approach."

To mitigate some common risks, ARLA advises the following:

• Pre-agree bills- Tenant payment of utility bills over a short term can be problematic, therefore it is best to set a price to cover costs at the start of the rental period. This avoids the occasionally problematic issue of recouping or disputing costs.

• Prepare the property for rent- As with long-term lets, it is wise to thoroughly clean the entire property and insure the small details, such as replacing light bulbs and clearing outside areas are done before prospective tenants visit or move in to the property.
  
  If you are moving out of your home to turn it into a rental property, ensure it is free from personal effects and put some items into storage if necessary.

• If you are renting out your own home for the first time,notify your mortgage and insurance providers as you may need to amend the terms of both if you are changing the use of your home to a rental property.

• Be aware of tenants' expectations- With short-term lets, tenants often expect amenities that are not usually offered in the private rental sector;  a common example is the assumption that the landlord will provide a cleaning and laundry service for bedding.
• Be careful when it comes to payment -Offering a variety of payment options, where possible, can encourage prospective tenants. It should be noted, however, that taking card payments can often represent an unacceptable degree of risk for the short-term landlord. Regardless of payment type, it is always worth ensuring funds have cleared ahead of the start of the tenancy. If funds are being transferred direct to your bank account, it is always best to use a dedicated account.
• Meet the incoming tenant -Do not arrange for keys to be collected through a third party other than a reputable lettings agent. It is far safer to meet and hand over keys in person, explain the workings of your property and agree when you will collect the keys at the end of the tenancy.

Tim Hyatt added: "If these tips are followed, it should be possible to strike a balance between remaining flexible with your rental offering and being a responsible short-term let landlord.  Any potential tenants must use an agent with experience in this area - to ensure a transparent and flexible arrangement."

Landlords should also be mindful that if a deposit is taken, it is likely to require protection through a Tenancy Deposit Scheme such as TDS.

*Data taken from the ARLA Members' Survey of the Private Rented Sector, covering Q4 2011 and Q2 2010.  All surveys and statistics can be downloaded from http://www.arla.co.uk/